Chapter IV – Excise Tax on Tobacco Products
SEC. 144. Tobacco Products. – There shall be collected a tax of One peso (P1.00) on each kilogram of the following products of tobacco:
(a) Tobacco twisted by hand or reduced into a condition to be consumed in any manner other than the ordinary mode of drying and curing;
(b) Tobacco prepared or partially prepared with or without the use of nay machine or instruments or without being pressed or sweetened except as otherwise provided hereunder; and
(c) Fine-cut shorts and refuse, scraps, clippings, cuttings, stems and sweepings of tobacco except as otherwise provided hereunder.
Stemmed leaf tobacco, tobacco prepared or partially prepared with or without the use of any machine or instrument or without being pressed or sweetened, fine-cut shorts and refuse, scraps, clippings, cuttings, stems, midribs and sweepings of tobacco resulting from the handling or stripping of whole leaf tobacco shall be transferred, disposed of, or otherwise sold, without prepayment of the excise tax herein provided for, if the same are to be exported or to be used in the manufacture of cigars, cigarettes, or other tobacco products on which the excise tax will eventually be paid on the finished product, under such conditions as may be prescribed in the rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner.
On tobacco specially prepared for chewing so as to be unsuitable for use in any other manner, on each kilogram, Seventy-nine centavos (P0.79).
The rates of tax imposed under this Section shall be increased by six percent (6%) every two years starting on January 1, 2011.
Manufacturer and importers of tobacco products shall, within thirty (30) days from the effectivity of this Act, and within the first five (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales for each particular brand of tobacco products sold at their establishment for the three-month period immediately preceding.
Any manufacturer or importer who, in violation of this Section, knowingly misdeclares or misrepresent in his or its sworn statement herein required any pertinent data or information shall, upon discovery, be penalized by a summary cancellation or withdrawal of his or its permit to engage in business as manufacturer or importer of cigar or cigarettes.
Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be fined treble the amount of deficiency taxes, surcharges and interest which may be assessed pursuant to this Section.
Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act or omission shall be criminally liable in the same manner as the principal.
If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence, without further proceedings for deportation.
Sec. 145. Cigars and Cigarettes. –
(A) Cigars. – There all be levied, assessed and collected on cigars a tax of One peso (P1.00) per cigar an ad valorem tax based on the net retail price per cigar (excluding the excise tax and the value-added tax) in accordance with the following schedule:
(1) If the net retail price per cigar is Five hundred pesos (P500) or less, ten percent (10%); and
(2) if the net retail price per cigar (excluding the excise tax and the value-added tax) is more than Five hundred pesos (P500), Fifty pesos (P50.00) plus fifteen percent (15%) of the net retail price in excess of Five hundred pesos (P500).
(B) Cigarettes Packed by Hand. – There shall be levied, assessed and collected on cigarettes packed by hand a tax at the rates prescribed below:
Effective on January 1, 2005, Two pesos (P2.00) per pack;
Effective on January 1, 2007, Two pesos and twenty-three centavos (P2.23) per pack;
Effective on January 1, 2009, Two pesos and forty-seven centavos (P2.47) per pack; and
Effective on January 1, 2011, Two pesos and seventy-two centavos (P2.72) per pack.
Duly registered or existing brands of cigarettes on new brands thereof packed by hand shall only be packed in thirties.
(C) Cigarettes Packed by Machine. — There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below:
(1) If the net retail price (excluding the excise tax and the value-added tax) is below Five pesos (P5.00) per pack, the tax shall be:
Effective on January 1, 2005, Two pesos (P2.00) per pack;
Effective on January 1, 2007, Two pesos and twenty-three centavos (P2.23) per pack;
Effective on January 1, 2009, Two pesos and forty-seven centavos (P2.47) per pack; and
Effective on January 1, 2011, Two pesos and seventy-two centavos (P2.72) per pack.
(2) If the net retail price (excluding the excise tax and the value-added tax) exceeds Six pesos and fifty centavos (P6.50) but does not exceed Ten pesos (P10.00) per pack, the tax shall be:
Effective on January 1, 2005, Six pesos and thirty-five centavos (P6.35) per pack;
Effective on January 1, 2007, Six pesos and seventy-four centavos (P6.74) per pack;
Effective on January 1, 2009, Seven pesos and fourteen centavos (P7.14) per pack; and
Effective on January 1, 2011, Seven pesos and fifty-six centavos (P7.56) per pack
(3) If the net retail price (excluding the excise tax and the value-added tax) exceeds Six pesos and fifty centavos (P6.50) but does not exceed Ten pesos (P10) per pack, the tax shall be:
Effective on January 1, 2005, Ten pesos and thirty-five centavos (P10.35) per pack;
Effective on January 1, 2007, Ten pesos and eighty-eight centavos (10.88) per pack;
Effective on January 1, 2009, Eleven pesos and forty-three centavos (P10.43) per pack; and
Effective on January 1, 2011, Twelve pesos (P12) per pack.
(4) If the net retail price (excluding the excise tax and the value-added tax) is above Ten pesos (P10) per pack, the tax shall be:
Effective on January 1, 2005, Twenty-five pesos (P25) per pack;
Effective on January 1, 2007, Twenty-six pesos and six centavos (P26.06) per pack;
Effective on January 1, 2009, Twenty-seven pesos and sixteen centavos (P27.16) per pack; and
Effective on January 1, 2011, Twenty-eight pesos and thirty centavos (P28.30).
Variants of existing brands and variants of new brands of cigarettes which are introduced in the domestic market after the effectivity of this Act shall be taxed under the proper classification thereof based on their suggested net retail price: Provided, however, That such classification shall not, in any case, be lower than the highest classification of any variant of that brand.
A `variant of a brand’ shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the brand.
Duly registered or existing brands of cigarettes or new brands thereof packed by machine shall only be packed in twenties.
Any downward reclassification of present categories, for tax purpose, of existing brands of cigars and cigarettes duly registered at the time of the effectivity of this Act which will reduce the tax imposed herein, or the payment thereof, shall be prohibited.
`New brands,’ as defined in the immediately following paragraph, shall initially be classified according to their suggested net retail price.
`New brand’ shall mean a brand registered after the date of effectivity of R.A. No. 8240.
`Suggested net retail price’ shall mean the net retail price at which new brands, as defined above, of locally manufactured or imported cigarettes are intended by the manufacturer or importer to be sold on retail in major supermarkets or retail outlets in Metro Manila for those marketed nationwide, and in other regions, for those with regional markets. At the end of three (3) months form the product launch, the Bureau of Internal Revenue shall validate the suggested net retail price of the new brand against the net retail price as defined herein and determine the correct tax bracket under which a particular new brand of cigarette, as defined above, shall be classified. After the end of eighteen (18) months from such validation, the Bureau of Internal Revenue shall revalidate the initially validated net retail price against the net retail price as of the time of revalidation in order to finally determined the correct tax bracket which a particular new brand of cigarettes shall be classified: Provided, however, That brand of cigarettes introduced in the domestic markets between January 1, 1997 and December 31, 2003 shall remain in the classification under which the Bureau of Internal Revenue has determined them to belong as of December 31, 2003. Such classification of new brands and brands introduced between January 1, 1997 and December 31, 2003 shall not be revised except by an act of Congress.
`Net retail price,’ as determined by the Bureau of Internal Revenue through a price survey to be conducted by the Bureau of Internal Revenue itself, or by the National Statistics Office when deputized for the purpose by the Bureau of Internal Revenue, shall mean the price at which the cigarette is sold on retail in at least twenty (20) major supermarkets in Metro Manila (for brands of cigarettes marketed nationally), excluding the amount intended to cover the applicable excise tax and the value-added tax. For brands which are marketed only outside Metro Manila, the `net retail price’ shall mean the price at which the cigarette is sold in at least five (5) major supermarkets in the region excluding the amount intended to cover the applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its average net retail price as of October 1, 1996, as set forth in Annex “D;’’ including the classification of brands for the same product which, although not set forth in said Annex “D,’’ were registered and were being commercially produced and marketed on or after October 1, 1996, and which continue to be commercially produced and marketed after the effectivity of this Act, shall remain in force until revised by congress.
Manufacturers and importers of cigars and cigarettes shall, within thirty (30) days from the effectivity of this Act, and within the first five (5) days of every month thereafter, submit to the commissioner a sworn statement of the volume of sales for each particular brand of cigars and/or cigarettes sold at his establishment for the three-month period immediately preceding.
Any manufacturer or importer who, in violation of this Section, knowingly misdeclares or misrepresent in his or its sworn statement herein required any pertinent data or information shall, upon discovery, be penalized by a summary cancellation or withdrawal of his or its permit to engage in business as manufacturer or importer of cigar or cigarettes.
Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be fined treble the aggregate amount of deficiency taxes, surcharges and interest which may be assessed pursuant to this Section.
Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act or omission shall be criminally liable in the same manner as the principal.
If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence, without further proceedings for deportation.
SEC. 146. Inspection Fee. – For inspection made in accordance with this Chapter, there shall be collected a fee of Fifty centavos (P0.50) for each thousand cigars or fraction thereof; Ten centavos (P0.10) for each thousand cigarettes of fraction thereof; Two centavos (P0.02) for each kilogram of leaf tobacco or fraction thereof; and Three centavos (P0.03) for each kilogram or fraction thereof, of scrap and other manufactured tobacco.
The inspection fee on leaf tobacco, scrap, cigars, cigarettes and other tobacco products as defined in Section 147 of this Code shall be paid by the wholesaler, manufacturer, producer, owner or operator of redrying plant, as the case may be, immediately before removal there of from the establishment of the wholesaler, manufacturer, owner or operator of the redrying plant. In case of imported leaf tobacco and products thereof, the inspection fee shall be paid by the importer before removal from customs’ custody.
Fifty percent (50%) of the tobacco inspection fee shall accrue to the Tobacco Inspection Fund created by Section 12 of Act No. 2613, as amended by Act No. 3179, and fifty percent (50%) shall accrue to the Cultural Center of the Philippines.
SEC. 147. Definition of Terms. – When used herein and in statements or official forms prescribed hereunder, the following terms shall have the meaning indicated:
(a) ‘Cigars’ mean all rolls of tobacco or any substitute thereof, wrapped in leaf tobacco.
(b) ‘Cigarettes’ mean all rolls of finely-cut leaf tobacco, or any substitute therefor, wrapped in paper or in any other material.
(c) ‘Wholesale price’ shall mean the amount of money or price paid for cigars or cigarettes purchased for the purpose of resale, regardless of quantity.
(d) ‘Retail price’ shall mean the amount of money or price which an ultimate consumer or end-user pays for cigars or cigarettes purchased.
